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Insight on Automation
A Sloper sent me an email, which I liked so much that I asked if I could make a post out of it; he kindly agreed to this, so here you are:
I read your post Pity the Sub Genius and agreed with a lot of what you wrote. However you missed what I think is the biggest killer of middle class jobs, and that is technological innovation. For sure many companies moved production overseas for the cheaper labor but I do not believe that to be the biggest reason for job loss. I can remember all through the 90's up until today that one of the main drivers of corporate profits was the steady, incremental increases in productivity. Many interpreted that to mean employees were working harder or faster or becoming more efficient. What it really meant was that employees were being displaced by technology and that made the work flow more efficient while bringing costs down.
I will use as an example Briggs and Stratton headquartered in Milwaukee, WI. In 1980 they employed 20,000 workers in their factories making small engines. Today that number is down to 5000. And the reality is that they moved no jobs out of Milwaukee and are manufacturing more product than they did in 1980. And many of the 5000 now employed are skilled technicians that service the mechanized assembly operations.
The same is true in the automotive industry and pretty much every other manufacturing segment of the economy. And it is not just the factory floor. Computers have slimmed the size of office staffs, phone answering systems have replaced call receptionists and so on. Computers have not only trimmed workforces but eliminated entire manufacturing companies as their products became obsolete.
And the future does not look any brighter for the middle class. The shrinkage of available jobs due to technology is a trend that will never abate. The economy will never be able to grow out of this predicament. Small companies can now buy robots like Baxter for about 20 grand that can do many repetitious tasks performed by human employees. He can work 24/7 if necessary, requires no health care or benefits, and robots are going to be the next big thing. There are mechanized processing lines developed that will eventually replace many low paid fast food workers as well.
Individuals with the mental aptitude to train and adapt to work within the technology and medical fields will do fine, but those without that aptitude will continue to struggle. Just where the increasing numbers of displaced workers will find meaningful employment that will provide a comfortable existence for them and their family's is ever harder to predict. The large influx off immigrants that are mostly filling manual labor and menial jobs suggest the middle class is not going to step backwards to fill those types of positions even if it is an available source of jobs.
This not at all a good prospect for the sub genius. Maybe it is the reality and bleakness of the situation that the role of technology is rarely mentioned when economists and politicians express concern over the growing wage disparity that is happening not only in this country, but other developed countries everywhere in the world. It is not a causation that has a solution as far as I can tell.
Being as in tune as you are with markets and technology I would love to read your thoughts on this issue, whether you agree with my position or not.
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Abolish all machinery and labor saving devices! Scourges of human welfare! We were so much better off in animal skins with flints!
Think of all the jaaaaawbs we could create if we scrapped one dump truck and employed people to move the dirt by hand!
http://www.belaztrucks.com/wp-content/uploads/2013/10/%D0%91%D0%95%D0%9B...
.... errr, what if we just kept the truck and pretended that a whole lot of people was moving that dirt by hand? Might be a bit cheaper! ...
Movie WALL-E comes to mind. And agree with all your points. It is now a permanent situation, including the part about Americans no longer interested in doing any manual labor at all. Nearly 100% Hispanic, no matter where or the type of job. They work cheap and steady and are willing to accept a lower standard of living than most Americans
It is going to roil this country something terrible and will affect many more than just the sub-geniuses. Without a middle class there will be a huge spill-down affect. Millions will not be able to afford expensive health care, forcing prices lower, or doctors to move out of the country, which won’t work either. The government will have to go further into debt subsidizing many services. Deflation will be rampant and unstoppable, even with massive money printing.
The oligarchs know all this. They are driven by greed, so layoffs and downsizing will continue, profits will rise, for a while. Then the s*** will hit the fan as consumers can borrow no more and quit buying more cheap crap. China will dump product and we will spiral down. Bears will be mostly happy, except for the violence and social unrest sure to come to the cities.
For a moment lets fast forward 30 years. Lets say 90% of manufacturing has been automated. Who will your customers be? In a general way, the displaced workers were customers also. Maybe not yours, but they were customers to many businesses. The wage earners keep money flowing through economy. People out of work don’t have money to spend. So I’ll ask again, who will the customers be?
That is a large part of the dynamic causing the force of deflation now - there is massive productive overcapacity unmatched by demand. As central bank intervention distorts market signals, capital continues to invest in production capacity (ie autombile industry), but demand is being destroyed by the greatest wealth inequity in history and destruction of the middle class. This is why central banks have blown serial bubbles over the past few decades. Without intervention deflation and contraction would rule.
"This is why central banks have blown serial bubbles over the past few decades. Without intervention deflation and contraction would rule."
Deflation will rule, anyway. Every cycle has a trough, which is something that canot be gotten around.
The robots....oh wait a minute
Trying to squeeze the future into today's economic paradigm is like squeezing a square peg into a round hole. The economic paradigm changes to allow the economy to function. If you think of a national economic system failing under the burden of mass unemployment then the state economic system gets replaced. When the national economy fails you get smaller economic systems developing at regional, town, village or family level, depending upon how severe the collapse is. But normally the systemic response is to make the economic system even bigger eg. a global economy.
I believe the systemic stress we're now seeing will create two groups of humans using separate economic systems, those in the shrinking global economy and those in the expanding local economies. Two distinct economic systems that function in completely different ways with no common ground between them other than cross trade in physical goods and services. For example the global economy may rely on money for transactions whereas the local economy may rely mainly on socially based forms of exchange. For example the Amish with their "barn raising" method of construction as a social method of exchanging labour and services locally.
What ever happens, there will be an economy as long as there are humans. The system we currently have doesn't need to exist in the future and trying to look at the future through the existing system is probably unhelpful.
Good point about displaced customers-that's the issue, companies have fewer customer because everyone is underpaid or out of work. Very real.
I guess that the best objective is not to know how to live with a fully automated industry in an evergrowing economy, but to provide evergrowing skilled work to maintain a middle class while the repetitive and inhuman tasks are being automated. This is the virtuous way, as it gets rid of the stupid grunt work to push for new industries and smart growth. You then aim for 70% middle class, as some northern countries were trying to do.
The other way is greed, where you replace workers with machine for more profit but you don't R&D, don't raise the skills, don't create new techs and don't care about what happens to the fired workers nor to the working conditions.
It's what is happening now, you don't need to fast forward 30 years. Inflation and salary stagnation makes it impossible for the people to buy anything - even if you're working a full schedule. Mass production with automation creates mass profits, it's unthinkable that it should not benefit to the workers as well even if they are "low grade". The fact that it goes to a handful of people who make 1000 times more than the rest but spend only 10 times more is what artificailly tips the balance.
Karma is a bitch, capitalists are hanging themselves out of greed. We are paying the dearest price, but hopefully it's hat they have pushed for so long that will bring their system to an end. I hope it's the shape of things to come and not just my wishful thinking.
Well written, but I disagree. What kills the middle class is true purpose - less autonomy for the sheeple - and greed. Because if you think about it, a company that uses robots will increase its productivity, as said in the article, and hence will increase its profitability. It's then up to the company to decide if they want to pay more the remaining workers.
There is more and more "audacious" companies making the bet of paying regular salary for 5 hours per day contracts, because they tend to get the same productivy. In the end they receive in return - karma is not always a bitch. And workers queue to work there.
So even though I appreciate the quality of the analysis, remember that robots and computers are just tools. They will never replace humans; they're just here to make our lives easier. It's the hand that carries the tool that is in fault, not the tool itself. Imho.
Automation was supposed to take all the jobs. That was the whole point! We need PRODUCTION, not JOBS. We got machines that allow one man to do the job of ten men? Then what happened to the four hour working week?
It costs too much to train workers. There can never be a 4 hour working day, and there would never be an 8 hour working day in a free market system. All the valuable work in a free market system is done by people who want to work 60-90 hours per week. The low-margin stuff, like serving tables, &c., is done by the exceptional individual who is motivate enough to get a part-time job. The masses just drink generic beer, eat welfare cheese and mate.
Automation eliminates jobs for people of lesser intellect. Gradually, the bar for a legitimate job will creep past the bar for mensa. Oh, and while the intelligence bar is rising, the morality bar is getting lower and lower. There will always be work for assassins, for example.
already automated, see DRONES.
Technology has wrought miracles, but the American middle class that produced that miracle has not shared in the profits, either through higher wages or greater leisure. Greed, not robotics, is destroying the miracle.
Those robots are expanding robotics technology to the point whereby other inventors can see many ways to use that technology to make products in other fields and to develop services that never existed before.
Silicon Valley is a good example of a growth industry that grows from itself, whereby technology breeds new technology. New products are being born every day.
When automation first became established in industries such as textiles, other industries immediately saw how this automation could be adapted to their product line. It created an explosion in innovation. The spread of this technology then created jobs. More and more positions became available because there were new industries that never existed before.
Unfortunately, the middle class has suffered an economic injustice imposed by a U.S. Congress partnered with the major industries and multinationals to form monopolies. This stifles competition, blocks the development of small businesses in America and discourages innovation. Inventors, researchers and engineers – primarily originating from the American middle class – have been cut out of the economic pie that they themselves created and have been stopped from sharing in the profits that they, the world’s most inventive class, made possible.
Destroy America's middle-class, her small merchants, professionals, highly-skilled workers and innovators, and you will destory America.
Hi JR
My 2 cents. There has always been a classic trade-off between Labor and Capital. Since Central banks have their thumb on the price of money-interest rates- Capital is subsidized and it is cheaper to replace Labor with new technology. Technology is Capital. A great idea needs money to get off the ground.
Also, so-called out-sourcing, the offshoring of jobs means loss of all secondary jobs that flow to the primary producer.
Loss of private sector jobs is a political decision. Period.
Greetings my friend.
K
Oh. I forgot to mention the growth in government jobs hasn't stopped despite the growth in technology. Odd thing that....
Loss of private sector jobs is a political decision. Period.
Tragically, true, Kayman. In a free-enterprise marketplace, politics would not be a dominating factor. And what makes it worse is that the politics, in this case, is corrosive and puts the selection of winners and losers into the hands of the central bankers. Every time, of course, the politics favors the bankers and punishes the small entrepreneur and average American.
As you mentioned, one of the most damaging parts of our failing economy is the tremendous surge in government employment, accompanied by the whole spectrum of a socialist-reward-system from bureaucracy to welfare to the ruling class.
Since Central banks have their thumb on the price of money-interest rates-Capital is subsidized and it is cheaper to replace Labor with new technology. Technology is Capital. A great idea needs money to get off the ground.
Ah, Kayman, would that you were a regular on Zero Hedge. As always your brilliance cuts to the chase which people, including myself, desperately need to understand how the economy operates – to navigate safely through the smoke and the mirrors to arrive at the truth.
"it is easy to conceive that great evils to our country and its institutions might flow from such a concentration of power in the hands of a few irresponsible to the people. Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence... would be more formidable and dangerous than a military power of the enemy..." Andrew Jackson, 1832
"Whoever controls the volume of money in any country is absolute master of all industry and commerce... and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate." President James Garfield
Thanks JR
My problem with ZH is that I have this other life. So... it's back to the coal mine.
K
If any of you haven't read this, it's worth the time. It's a sci-fi short story about two very different possible outcomes to our massively automated future.
http://marshallbrain.com/manna1.htm
Completely agree. Only a small percentage of people in our corrupt nation state are enjoying the benefits of automation. And they are not the ones creating the benefits. As proof look back about a 100 years. The tractor came along and eliminated ~40% of all the jobs in the United States e.g. farm jobs. Was that the end of our society as we know it? No. People got richer and worked fewer hours at other jobs. Robotics will have far less of an impact and we'll all be better off ... provided that we end our crony capitalism.
Was that the end of our society as we knew it? Yes, it was. Socialist revoluitons swept the world, and millions died.
This time the difference is that we have a welfare state to keep the rabble from rioting, mostly. Also the rabble are fat and have TV and meth.
Socialism is a failed system. It not only fails to understand human nature but most socialist theory is based on the desire to transfer wealth to a tiny minority of self-identified elite.
The only way the Soviet Union and its failed communist economic system with its slave-labor force and concentration on armament production survived as long as it did was with the help of the United States.
Alexander Solzhenitsyn defined it:
“It is American trade that allows the Soviet economy to concentrate its resources on armaments and preparations for war. Remove that trade, and the Soviet economy would be obliged to feed and clothe and house the Russian people, something it has never been able to do. Let the socialists among you allow this socialist economy to prove the superiority that its ideology claims. Stop sending them goods. Let them stand on their own feet, and then see what happens.”
When the international bankers exported America’s manufacturing base and capital to China; they exported Western capitalism, i.e., America’s strength, to Communist ideologues.
If America falters, there will be no United States to come to America’s aid and provide the banker oligarchy and its central planning and supporters the luxury of keeping their collectivist cake, while eating off the remaining fruits of capitalism. Communism, i.e., central planning, does not work, except temporarily at the point of a gun, because there is nothing in it for the individual. Let’s see how far the bankers get without free enterprise in their “construction of a final centralized government in a country called Europe.”
Stop blaming automation for the problems that plague us. This argument has been bantered around for over a century by socialist minded assholes with an agenda. The real problem is that what once was the free market is being smothered to death by people who think that big government is the answer to all our problems. Get rid of big government and cut loose the forces of entrepreneurialism and watch the economy thrive with everyone once again being productive. It's like magic! This will even work regardless of strains on natural resources such as oil, steel, water shortages, it doesn't matter. The economy, if allowed to run freely will auto-correct in ways that no government is capable of doing. All a government knows is control over people in order to facilitate its own self preservation.
Imagine, if you will a government agency that seeks to solve a problem with the world (social services, for example). Ideally, the intent of that agency should be to look at the problem objectively and to put forth a solution that, if effective, results in the eventual elimination of said agency for the simple reason that the problem now no longer exists. Instead, these agencies only serve to further their own existance and mostly enact "solutions" that only serve to make the problem worse, thereby allowing them to argue for more money because, see, the problem is growing and getting out of hand so we need more and more bureaucrats and money to throw at it or else the world as we know it will come to an end.
I will say that automation coupled with allowing the free market to work and advances in technology WILL provide all the jobs necessary for anyone willing to work, guaranteed. I personally did not get a college degree and started out in my early 20's as a gas station pump jockey and moved on to fixing cars when the owner of the gas station discovered I had a knack for that sort of thing. This was back when there were full service gas stations everywhere across the country, most of them privately owned. Since then, 3/4 of those stations no longer exist with modern mega stations/convenience marts taking over the market. Just the same I managed to make a living for 18 years fixing cars. Oddly enough, around 1990 I got my first computer and taught myself how to program and now I run an internet company that employees a number of persons in sales, graphics, and tech support.
The moral here was that new technology came along (the personal computer and the internet) and I adapted and changed and am even more gainfully employed than before. In fact, you might say that my transition allowed me to provide work for a number of people, none of which are old enough to even remember full service gas stations where someone would clean your windshield and check your oil and tires while you sit in the comfort of your car. Times change but opportunity is always there for people willing to change with them.
"Stop blaming automation for the problems that plague us. This argument has been bantered around for over a century by socialist minded assholes with an agenda"
Robotics will eventually be able to do anything. The autos you used to fix- robots will be able to mine the ore, turn it ino metal, manufacture the parts, construct them into a car and repair the car. No human hands necessary in any part of the process.
Someone wrote recently that advances in technology, created new jobs to replace the jobs being lost by old technology. He wrote that for the first time, that is not happening now.
I read a story recently that at a fast food restaurant, a computer was a manager. The workers wore headsets and the computer directed them in their tasks.
Technology is taking over more and more jobs and will continue to do so as technology improves.
angryBuddhist
You are correct. It's the same old bullshit, forever. "Kill the machines, they're replacing us."
https://en.wikipedia.org/wiki/Luddite
Of course if you simply let labor and capital jostle around until it finds equilibrium, everyone is employed. In fact the jobs are better, too.
The real problem is that what once was the free market is being smothered to death by people who think that big government is the answer to all our problems.
That is indeed our principle issue... at the moment. The drive to automate has been accelerated by government imposition of costs that makes hiring humans uncompetitive.
I used to dismiss concerns about automation as falling into the 'lump of labour' fallacy. But, as a thought experiment, imagine if 'we' could churn out robots that were more productive than human beings in practically every way? ie - they could adapt to tasks more quickly, work more accurately and swiftly, work longer hours, and consume fewer resources while doing so? You can argue that we're nowhere near that point, and I agree; but what happens when we can?
Now, it may be at that point we'll all have a couple of robobutlers, who will do all our toil, so we needn't have much income to survive, and we'll live better than ever. Our robobutlers will grow most of our own food for us, do every household chore, etc, leaving us free to devote our lives to art and leisure and yelling at each other on Zerohedge.
Or... the hollowing out of the middle class between now and then will mean no one will have their own land for growing their own food, and no capital to buy robobutlers of their own. We'll all be living in something like Ferguson.
@ The real problem is that what once was the free market is being smothered to death by people who think that big government is the answer to all our problems.
According to the Center for Responsive Politics, lobbying spending on Congress was $3.24 billion in 2013.
But, according to The Washington Post, the growing trend toward soft lobbying – like campaign activity – has gone dark, which leaves expenditures invisible to the public or to regulators.
“And so what looks like a [slight] decline [from $3.55 billion in 2010] may actually be an increase,” says WaPo.
The truth is, America's politicians are sycophants guided exclusively by selfish motives -- they bootlick the lobbyists in order to stay in office. When the American people lost the Congress to the lobbyists, they lost representative government.